Payday Loans and Your Credit Score: What You Need to Know

Loans are almost synonymous with a good credit score. You have a terrible score, late payments, missed bills, you can kiss a personal loan goodbye. Or if you are lucky enough to get one, chances are lenders will hit you with some terrible deals.

Payday loans are different though. Here’s what you need to know about the correlation between payday loans and your credit score.


Your credit score prior to the payday loan

These days, you can find dozens, if not hundreds of payday loans online. Your options are extremely diversified. While you can research lenders yourself, it’s wiser to rely on a comparison site to find all the deals sorted by different criteria. It’s just faster and easier to choose the best possible deal.

Now, how about the credit score? Does it really matter? While some lenders may try a credit check, the truth is most of them won’t bother. Why? Simple. Payday loans are meant to be short term loans. The ideal payday loan should be repaid in full once your paycheck comes.

In other words, they’re meant to last for less than a month.


In some cases, you can get payday loans extended over more months, but interest rates will clearly add up. In terms of requirements, lenders will need a few things. You need to be over 18, and you must be a resident. You’ll also need a source of income.

Otherwise, how can you prove that you’ll be able to repay the loan? Exactly! Your credit score is irrelevant at this point. If you have a job, no one will really bother about how bad your score is.

But at the same time, since payday loans are meant to last for less than a month, you won’t get a fortune, You’ll get enough to fix your car, pay a medical bill or handle an event, such as your kid’s birthday. You won’t get more than your actual income, until you get a payday loan that expands over more months.

And at this point, it’s no longer referred to as a payday loan…


Bottom line, your credit score doesn’t matter when you go for a payday loan, but your job, business or other source of income, which you’ll need to prove. If you have a job, a few payslips will usually do. If you run a business, you’ll probably need accounting records.

Whatever your source of income is, check the lender’s requirements.


Your credit score after a payday loan

Cover your repayment in full once your paycheck comes, and your payday loan won’t affect your credit score. Even if you have a loan expanding over more than just one month, stick to the monthly repayments, and you won’t have any issues with your credit score whatsoever.

In fact, repaying everything on time will actually help you improve your credit score, which is a pretty good thing if you’re actually getting ready for a bigger loan. That’s because it proves you can stick to the terms and conditions, but you’re also financially responsible.


Just like all types of borrowings, payday loans can and will show up on your credit report if you apply for something else or someone takes a look into it. Unexpectedly, some lenders refuse people who still have ongoing payday loans that haven’t been completed yet.

It’s not even recommended to go for more than one payday loan at once, after all.

While not always a general rule, some lenders may have a negative view on your report if they see payday loans popping up on your report on a regular basis. If you need to get a payday loan every few months, chances are you’re not budgeting accordingly, so you’re not even ready for a bigger loan.


In other words, a payday loan will show up on your credit record, and it will affect it. It’s up to you to determine whether the outcome is positive or negative. Repay it on time and respect the terms and conditions, and your credit score will go up.

Default on it, and your score will go down. At the same time, you’ll be hit with extra fees and expenses, putting you in even more debt.

Indeed, just because your credit score goes low, it doesn’t mean you’ll be rejected by another payday lender because they don’t really look at credit reports. But then, a different type of loan could come with some restrictions or a bad deal.


As a short final conclusion, payday loans are not affected by the credit score, but they will, on the other hand, affect it in one way or the other. It’s a type of borrowing and will show up on your record. It may affect future applications for other types of loans, even if payday lenders don’t look at it.